Open-ended fund certificates are an investment form in which participants are used by professional fund managers on behalf of capital contributions. So with such a passive investment, is it safe?
Learn about open-ended funds and how to invest in open-end funds
An open-ended fund is an investment fund formed from the contributions of a large number of participating investors and managed and used by a fund management company. With an open-ended fund, investors benefit from the difference between the buying and selling prices of the fund certificates or receiving dividends from the fund.
In particular, investors can sell fund certificates to the fund management company themselves based on net asset value (NAV), which is an advantage compared to closed-end funds. Open-ended funds have an unlimited lifetime, so they are suitable for long-term investors.
The way to invest in open-ended funds is not too complicated, investors only need to register to open an account at a fund management company or a securities company that is a distribution agent for fund certificates. The form of trading of open-ended fund certificates will be through purchase and sale registration orders or through the electronic trading system.
Participants can invest in small amounts and invest periodically on a monthly or quarterly basis in open-ended funds. This helps improve the ability to manage personal capital.
Is mutual fund investment safe?
Open-ended funds are managed by professional fund management companies and are tightened by the State Securities Commission and the Ministry of Finance by a strict legal system. Therefore, investing in open-ended funds can bring peace of mind to participants.
In addition, the open-ended fund has the participation of the custodian bank with the role of supervising, depositing and preserving assets for investors in addition to an audit company that will audit it annually. The operation of the open-ended fund is transparent and is periodically disclosed to investors. Investment objectives and strategies are also disclosed in the fund charter and prospectus.
However, open-ended funds may face some problems such as open-ended fund certificates being suspended from trading due to force majeure from the fund management company.
In case the fund is dissolved, the general meeting of investors has the right to designate an independent auditing organization to inspect and evaluate liquidation activities, and appraise the distribution of fund assets to investors. The fund management company is responsible for implementing the approved plan.
Is the effect from open-ended fund good?
Fund managers act on behalf of capital contributors to use funds from the fund to create a portfolio of various financial products such as stocks, bonds, and certificates of deposit. These products are all profitable, but they also carry a certain level of risk.
Usually open-ended funds can be more clearly classified according to the sector in which the fund invests such as a stock fund, a bond fund or a balanced investment fund. In particular, the stock investment fund will focus a lot on stocks on the floor, fluctuations depend heavily on factors such as macroeconomics, industries, and ability to do business.
Thus, the profitability can be very high, but there is always a potential for risk, what fund managers need to do is regularly swap portfolios to achieve the highest efficiency.
With a bond investment fund, thanks to its stable characteristics and commitment to paying fixed interest, the safety level is quite high. However, funds that focus on bonds will not be as profitable as having a portfolio of many stocks.
With a balanced investment fund, the ratio between high-yielding assets such as stocks or safe such as bonds and certificates of deposit is relatively high. Profitability can be stable but not too high.
Who are open-ended funds suitable for?
Through learning about how open-ended funds work and profitability, it can be seen that this investment field will be suitable for people with idle money who want to earn profits but are not equipped with knowledge. or do not have time to enter the market.
Open-ended funds provide professional management of participants' investments, ensuring the principles of fund strategy, diversifying investment products, minimizing risks and maximizing profits.
